[2025] EWHC 2294 (Ch)

The Respondent’s case - overview

The Respondent fully contests this application. He maintains that:

at the time of the Company’s entry into CVA, the Company owed him the sum of £97,445 on his director’s loan account, plus ongoing contractual interest at 8% per annum;

under the terms of the trading CVA, the Respondent, his fellow director and other staff were entitled to continue to be paid their pre-CVA salaries. The Respondent’s gross salary at the time of the Company’s entry into CVA was £200,000 per annum (or £16,666 per month) and his salary net of PAYE and NIC came to approximately £10,377 per month;

in April 2019, on the advice of Mr Adamson, the lead supervisor, he came off the Company’s PAYE payroll, ceased to be paid salary, and received payments in reduction of his director’s loan instead. Mr Adamson recommended this change to save the Company the PAYE and NIC that would otherwise be payable on the Respondent’s salary, thereby reducing the cost to the Company of trading in the CVA (‘the salary/loan swap arrangement’);

the loan repayments made to the Respondent between April and December 2019 in place of salary were calculated at £10,000 per month, the rough equivalent of what the Respondent’s net monthly salary would have been had he remained on the Company’s payroll;

the overall total of £101,000 paid by the Company to the Respondent from 25 April 2019 to 2 December 2019 is the equivalent of £97,445 owed to him on his director’s loan account plus contractual interest at 8% totalling £4,463.77, leaving a balance of unpaid interest as at the time of the last payment on 2 December 2019 of £908.77;

the salary/loan swap arrangement saved the Company in the region of £80,000 in PAYE and NIC;

Mr Adamson was at all material times fully aware that the loan/salary swap arrangement had been put in place on his advice and at no time during the course of the CVA did he indicate that there was any problem with it;

at no material time during the 18 months or so which Mr Adamson had then spent as lead administrator, in the administration put in place on 3 January 2020 following termination of the CVA on 17 December 2019, had Mr Adamson indicated any problem with the salary/loan swap arrangement, still less intimated proceedings against the Respondent;

it was only after the unexpected death of Mr Adamson in June 2022, when Mr Kienlen took over as lead (by then sole) administrator, that anyone had intimated a claim in respect of the salary/loan swap arrangement.

By the conclusion of trial, it was common ground that the Respondent had come off the Company’s payroll and stopped receiving salary from April 2019 onwards.

The Respondent’s fellow director, Mr Jason Lartey and the other members of staff (none of whom had lent the Company monies) remained on their respective payrolls and continued to receive their salaries during the course of the trading CVA.